Raining Money

Steyn on the 'stimulus':

For Britons of a certain age, the defining moment of the pre-Thatcher years came in 1976 when the chancellor of the exchequer, Denis Healey, was forced to go cap in hand to the International Monetary Fund and seek a loan—just like any old president-for-life of one of those bankrupt banana republics dear old Bono is always urging debt relief for. But I wonder how many Brits remember the precise figure of the humungous wad of dosh Chancellor Healey so desperately needed to rescue his flailing nation?

Four billion dollars.

Bailing out a G7 economy has gotten a little pricier since those days. A billion here, a billion there, and pretty soon you’re talking chump change. “Anything much less than $1 trillion,” explained Rep. Lynn Woolsey the other day, “would be like trying to put out a forest fire with a squirt gun.” A giant forest fire is ravaging the U.S. economy, and you’re standing there waggling your $700 billion squirt gun and doing nothing but watering your toecaps. As for poor Lord Healey’s $4 billion, that wouldn’t cover your squirt gun’s shipping and handling.

President-elect Obama is being wafted into office not so much on a tide of cash or even credit but on a spectacular reconfiguration of the bounds of language. In the old days, when a currency’s value was eroded and the number of zeroes required for routine transactions risked making the regime look ridiculous, governments would revalue the monetary unit—as the French did in 1960, introducing a new franc worth 100 of the old inflation-racked ones. In America, as far as I can tell, most of us are still spending and earning the old Yankee dollar—you know, the one that just about covers the cost of a newspaper and a small cup of coffee at my town’s general store. But in Washington, for the purposes of public discourse, some strange new Zimbabwean unit seems to have been introduced between the election and the inauguration: No matter how many zeroes you stick on the end, the next guy will always add a couple more.

For the redistributive class, a trillion was a psychological Rubicon: It sounds odd the first time you say it. What does it mean in the real world? The cost of everything in West Virginia named after Robert C. Byrd plus the vibrating Shiatsu massage lounger and five-foot steel sculpture of migrating salmon illegally installed in Ted Stevens’s Alaskan chalet? But deploy the word hither and yon, to Wolf Blitzer and Katie Couric, and after a while “trillion” trips trillingly off the tongue. So now no politician demanding immediate government action wants to come off like Doctor Evil and invite instant derision by urging some nickel ’n’ dime billion-dollar boondoggle. In the bright new dawn, “ONE! TRILLION!! DOLLARS!!!” is the kind of price tag that commands respect. Congress is planning, at the time of writing, to double domestic discretionary spending. At the time of reading, I’m confident they’ll have quadrupled it. The Khmer Rouge proclaimed Year Zero; for the incoming Obama administration it’s the Year of Twelve Zeroes.

What is a trillion dollars? Well, it’s too many numerals to fit on your pocket calculator. But, given the accelerating obesity crisis in the United States, it’s clear that many American pants could use far larger pockets. So the Obama administration will be offering tax credits to families who participate in the large-pocket impact study commissioned by the Pocket-Size Regulatory Authority. That should stimulate the economy sufficiently to stimulate someone into inventing the four-foot-wide pocket calculator that shows enough zeroes to calculate the size of the bailout. Alternatively, we could put up one of those constantly whirring electronic scoreboard thingies in Times Square. Well, okay, not Times Square. But Central Park would probably be wide enough.

And why stop there? Barry Ritholz, author of the forthcoming book Bailout Nation, calculated—gosh, was it only six weeks ago?—that the tab for the bailout by November 24 was already $4.6165 trillion, which looks much more convincing because it’s big but not round. It’s specific to four decimal points, which sounds like they’ve got way down in the weeds of taxi receipts and lunch money. The media coo over Obama’s “new New Deal,” but, as Mr. Ritholz pointed out, if you adjust for inflation, the combined costs of the old New Deal plus the Louisiana Purchase, the Marshall Plan, the Korean, Vietnam, and Iraq wars, and every NASA project in history—oh, and the S&L crisis—add up to a mere $3.92 trillion. Even as he was totting up his numbers, the Bloomberg news service estimated that, factoring in Citibank and a couple of other Johnny-come-latelys, the bailout bill was in fact up to $7.76 trillion—which is the combined cost of all that other stuff (Louisiana Purchase, etc.) plus the $3.6 trillion of the Second World War. John Kerry famously denounced the Republicans for “opening firehouses in Baghdad and shutting them in the United States,” but not anymore: After opening firehouses in Baghdad, Saigon, Seoul, Tokyo, Western Europe, and the moon, we’re now opening even more over here, to house the new fire trucks with all those trillion-dollar hoses for the raging conflagration. Obama isn’t the new New Deal. He’s the new everything. It seems safe to say that, adjusted for the usual government underestimates, by, oh, mid-2010 the bailout will have cost more than all of American history combined.

And by then we’ll probably need a new round number. What’s the name for the avalanche of dough that comes after a trillion? I asked Senator-designate Caroline Kennedy, and she said: “Cotillion?” Close enough. By 2011, we’ll need a cotillion-dollar stimulus package to . . . um, “create jobs” and, er, “help middle-class families.”
That’s the funny thing. The price tag may be unprecedented but the products are distressingly precedented. “The administration’s number-one goal,” said the new president, “is to create 3 million new jobs, more than 80 percent of them in the private sector.” And that sounds kind of impressive—unless, that is, you’re one of those capitalism-red-in-tooth-and-claw types who wonder what kind of functioning polity is so structurally decayed that it’s supposed to be good news that a mere 20 percent of new jobs will be government work. Are 600,000 new government workers really necessary to stimulate the U.S. economy? And, come to that, will a $3,000 tax credit really persuade a private company to take on a new employee it wouldn’t otherwise have hired, or will the bulk of the dough just go to companies that would have hired the extra workers anyway?

Then there’s infrastructure. “Infrastructure,” says James Oberstar, chairman of the House Transportation and Infrastructure Committee, “is going to be the cornerstone of this stimulus initiative.” Representative Oberstar has a fairly expansive definition of “infrastructure investment”—it includes remodeling the National Zoo in Washington—but one assumes at least a portion of the outlay would do some good. After all, freight trains that take two days to get from the Port of Los Angeles to the outskirts of Chicago currently spend another 48 hours crawling across the congested rail lines of the Windy City.

But it’s not lack of money that’s responsible for America’s sclerotic infrastructure, it’s the inability to make things happen on an expeditious timeframe. You think that Chicago bottleneck’s bad? If they were trying to build the transcontinental railroad now, they’d be spending the first three decades on the environmental-impact study and hammering in the golden spike to celebrate the point at which the feasibility commission’s expansion up from the fifth floor met the zoning board’s expansion down from the twelfth floor. If 9/11 was (as they used to say) “the day everything changed,” that seven-year hole in the ground in the heart of Lower Manhattan is a monument to how hard it is to get anything changed in today’s America. So good luck “stimulating” the economy with infrastructure. One reason Google and Apple and other American success stories started in somebody’s garage is that that’s the one place where innovation isn’t immediately buried by bureaucracy. As to Representative Woolsey’s rampaging forest fires, these days they’re caused mostly by federal eco-regulation preventing traditional prudent stewardship such as basic brush-cutting.

So much for “job creation” and “infrastructure.” What else is there? Well, it’s amazing with a trillion-dollar barrel how quickly you wind up scraping the bottom of it. In Obama’s “American Recovery and Reinvestment Plan,” two of the five objectives are to “computerize the health-care system” and “modernize classrooms.” That sound you hear is the computerized eye-rolling with which every modernized NR column now comes equipped. The Congressional Progressive Caucus, on the other hand, wants “green jobs creation” and “construction of libraries in rural communities to expand broadband access.” And in a postmodern touch, Mark Pinsky at The New Republic makes the pitch for a new Federal Writers’ Project in which writers laid off by America’s collapsing newspaper industry would be hired by the government to go around the country “documenting the ground-level impact of the Great Recession.” As FDR would have said, we have nothing to fear but running out of ideas to blow the trillion bazillion dollars on. America has a money-no-object government with a lot of money but no great objects.

And nobody cares. In the final triumph of liberalism, the fact that incomprehensible sums are being allocated to no particular purpose is taken as evidence of the adminstration’s virtue and determination. If you’re at a New Hampshire town meeting and the board of selectmen proposes a $3,000 fence for the local dump, some old coot in plaid will stand up and demand to know why the fence costs three grand. But if you announce that you’ll need $12.3 trillion for a stimulus package, everyone says: Well, sure, that shows how serious things must be. “This isn’t about big government or small government,” says President-elect Obama. “It’s about building a smarter government.” “Smart government” seems best understood as the stage that’s even bigger than big government. It’s like Starbucks: tall, grande, and then smartie.

And, whether or not we get a massive federal program of rural library construction, we seem certain to get an acceleration of the grim leftward ratchet effect:

a) more subordination of the dynamic part of the economy to arthritic government regulation;

b) more of the remorseless annexation of health care by government, until eventually the point about whether to move to a socialized system will be entirely moot;

c) more so-called tax cuts, a term the Democrats have successfully usurped to apply to nanny-state “credits” the government condescends to allow you in return for living your life the way they want you to;

d) federally funded preschool and a few other entitlements that will metastasize way beyond any attempted constraints and further deform the relationship between the citizen and the state;

e) continued incremental removal of more and more citizens from the federal tax rolls, until round about 2012 a majority of American adults are paying no federal tax at all but are able to vote themselves more and more lollipops from the minority who do;

f) a few small nothing peripheral Community Reinvestment Act–sized programs that nobody notices until, a decade or two and a couple of reforms later, they’ve mutated into a hideous wart-encrusted tail wagging an ever more tumor-ridden and cadaverous old pooch.

The skids that greased the good ship Lollipop were put in place by the hysteria of last September when the supposed crisis broke and the experts began running around saying, “Don’t just stand there, spend something.” As readers will recall, it was Polonius who advised, “Neither a borrower nor a lender be,” and in America we are approaching that blessed state. A man who borrows $400,000 for a house he cannot afford isn’t really a “borrower,” is he? After all, every politician agrees that the priority is to keep people in “their” homes, and the Congressional Progressive Caucus is calling for a “moratorium on foreclosures,” which is a polysyllabic way of saying there’s no need to make your monthly payments. In what sense then is he “borrowing”?

And the banker who loaned the 400 grand isn’t a “lender” of anything terribly real, is he? Not in the Age of Leverage—of derivatives, of credit-default swaps, and of other artful packaging. “We refused to touch credit-default swaps,” the author and investment adviser Nassim Taleb said. “It would be like buying insurance on the Titanic from someone on the Titanic.” But a lot of people did just that. The Canadian commentator Jay Currie, waxing lyrical, put it this way: “If two people make a bet on the fall of a raindrop and each puts up, say, their shoes, the bet is a real bet. If they put up cash it is very close to a real bet. IOUs are not much of a bet. Someone else’s IOUs? Still less of a bet. A good deal of imaginary money is going to money heaven, which is sort of like saying that your stuffed animal is dead.”

Except when the administration steps in to replace the dead imaginary money with real (or realish) money. Having, in effect, colluded in the destruction of meaningful risk-evaluation, the government decided it was obliged to act not to prevent a Thirties-style “credit crunch” but to prop up an unsustainable form of pseudo-credit.
“Borrowing,” continues Polonius, “dulls the edge of husbandry”—and that goes double for government, whose husbandry is dulled in the best of times. Whatever it does for subprime homeowners, the principal beneficiaries of the bailout are the incoming president and his Democratic Congress, licensed by the outgoing treasury secretary as arbiters of unlimited federal largesse. Banks, homeowners, auto makers, formerly golden states . . . the line stretches around the block, and why not? “Bailout” is to “earmark” as “undocumented worker” is to “illegal immigrant”—an invitation to come out of the shadows and claim your benefits.

Does Congress have trillions of dollars to create all those government jobs on study groups of the environmental sustainability of infrastructure projects? No. As the cliché goes, we’re accumulating debts our grandchildren will have to pay off. Which admittedly is a better situation to be in than the one in Europe, which demographically speaking has no grandchildren to stick it to. But, as I always say, it’s not the cost of these programs. They would be wrong if Bill Gates wrote a check to cover them every month. They’re wrong because they represent a transfer from the citizen to the state not of money but of power. And over time, as we see in the urge to expunge words like “default” and “foreclosure” and indeed any form of moral hazard from life, they have a debilitating effect. A society can cope with corroded infrastructure more easily than a corroded citizenry. “You never want a serious crisis to go to waste,” says Rahm Emanuel. Is it really a “serious crisis”? Three decades after Britain’s humiliating grovel to the International Monetary Fund, Denis Healey’s position today is that it was all a silly bookkeeping error by government civil servants: It turns out they didn’t need the cash infusion after all. He only found out too late.

Hmm.